Revenue of $38.1M- 52% increase compared to third quarter revenue reported in 2017, prior to the adoption of Accounting Standard Codification Topic 606 (ASC 606)- 55% increase compared to the same quarter of the prior year’s pro forma revenue adjusted for the effects of ASC 606 as if adopted in 2017- 7% sequential growth versus second quarter 2018 as adjusted for ASC 606

Results from the MESA (Multi-Ethnic Study of Atherosclerosis) trial published in the Journal of Electrocardiology found 4% newly diagnosed AFib or Atrial Flutter among 1,100 cardiovascular disease-free patients who were monitored with Zio XT

Successful launches of Zio AT in key pilot accounts leading to the adoption of iRhythm as a full solution in those accounts

Commitment to long-term hiring plans with continued near-term focus on salesforce productivity through the development and onboarding of new reps

Our strong results in the quarter reflect the exceptional progress we’ve made on salesforce productivity, large integrated system penetration and infrastructure support of the sales operation. In addition, our ability to now offer both Zio XT and AT on one platform is driving improved account penetration, with an increasing number of customers now migrating to the full range of Zio applications, said Kevin King, CEO. I am confident that Zio by iRhythm is displacing legacy options and emerging as the standard of care in long-term continuous monitoring.

Third Quarter Financial ResultsRevenue for the three months ended September 30, 2018 increased 52% to $38.1 million, from $25.0 million during the same period in 2017 prior to the adoption of ASC 606 and increased 55% from $24.6 million during the same period in 2017 adjusted for the effects of ASC 606. The increase was primarily due to increased salesforce productivity, expansion into new accounts, improved penetration of existing accounts, and a continued shift to higher priced contracted units.

Gross profit for the third quarter of 2018 was $28.2 million, or 73.9% gross margin, up from $18.1 million, or gross margin of 72.4%, during the same period in 2017 prior to the adoption of ASC 606 and $17.7 million, or gross margin of 71.9%, for the same period of the prior year prior adjusted for the effects of ASC 606. Margin expansion was driven in part by productivity gains through our proprietary algorithms and workflow enhancements, a continued shift to higher priced contracted units, and improved claims collectability.

Operating expenses for the third quarter of 2018 were $37.9 million, an increase of 57% compared to the same period in 2017 prior to the adoption of ASC 606 and an increase of 60% compared to the same period in 2017 adjusted for the effects of ASC 606. The increase in operating expenses was driven by personnel-related costs from our sales team and sales support expansion, increased spend on long-term development efforts, increases in the company’s stock-based compensation expenses and costs associated with bad debt expense adjusted for Topic 606.

Net loss for the third quarter of 2018 was $10.2 million, compared to $6.5 million during the same period in 2017 prior to the adoption of ASC 606, and $6.5 million for the same period in 2017 adjusted for the effects of ASC 606. Guidance for Full Year 2018iRhythm projects revenue for the full year 2018 to range from $142 to $144 million, inclusive of ASC 606, which represents 49% to 52% growth over the company’s prior year, as adjusted and presented on a non-GAAP basis to show the effects of ASC 606. Gross margins for the full year 2018 are expected to range from 73.5% to 74.5% and operating expenses for the full year 2018 to be between $147 to $149 million. This compares to previous revenue guidance of $138 to $141 million, gross margins of 73% to 74% and operating expenses of $143 to $147 million.

Webcast and Conference Call InformationiRhythm’s management team will host a conference call today beginning at 1:30 p.m. PT / 4:30 p.m. ET. Investors interested in listening to the conference call may do so by dialing (844) 348-0016 for domestic callers or (213) 358-0876 for international callers, and referencing Conference ID: 2187516 or from the webcast on the Investors section of the company’s website at: www.irhythmtech.com.

About iRhythm Technologies, Inc. iRhythm is a leading digital health care company redefining the way cardiac arrhythmias are clinically diagnosed. The company combines wearable biosensor devices worn for up to 14 days and cloud-based data analytics with powerful proprietary algorithms that distill data from millions of heartbeats into clinically actionable information. The company believes improvements in arrhythmia detection and characterization have the potential to change clinical management of patients.

Forward-Looking StatementsThis news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These statements include statements regarding financial guidance, market opportunity, ability to penetrate the market and expectations for growth. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties, many of which are beyond our control, include risks described in the section entitled Risk Factors and elsewhere in our filing made with the Securities and Exchange Commission on the Form 10-K on March 1, 2018. These forward-looking statements speak only as of the date hereof and should not be unduly relied upon. iRhythm disclaims any obligation to update these forward-looking statements.

The adoption of ASC 606 resulted in a change to net revenue primarily due to timing differences in its recognition of revenue related to non-contracted third-party payor claims as a result of changing from recognition based on the earlier of notification of the payor benefits allowed or when payment is received to the accrual basis based on historical experience.

Based on the Company’s improving collections profile and interpretation of ASC 606 guidance, the collectability rate was deemed substantially all and customer credit risk is not deemed a price concession reducing revenue. Customer credit risk is deemed SG&A expense, an impairment loss per ASC 606. The table below presents an updated summary of the cumulative change of ASC 606 and includes the impact to the quarterly results for 2017.

ASC 606 Impact

(Unaudited)

Year ended December 31,

2017

2014

2015

2016

Q1

Q2

Q3

Q4

Total

Cumulative

Total revenue adjustments

742

2,489

(1,504

)

(1,515

)

(938

)

(387

)

(479

)

(3,319

)

(1,592

)

Operating expenses

(30

)

(123

)

(663

)

(672

)

(558

)

(431

)

(469

)

(2,130

)

(2,946

)

Net loss adjustments

$

772

$

2,612

$

(841

)

$

(843

)

$

(380

)

$

44

$

(10

)

$

(1,189

)

$

1,354

In this release, the company refers to non-GAAP 2017 ASC 606 Revenue, non-GAAP 2017 ASC 606 Gross Margin, non-GAAP 2017 ASC 606 Operating Expense and non-GAAP 2017 ASC 606 Net Income. Effective January 1, 2018, the company adopted ASC 606 using the modified retrospective method, which means that the total amount of revenue reported from second quarter 2017 has not been restated in the current financial statements. The company has provided comparable information on revenue, operating expenses and net income in accordance with ASC 606 to allow investors comparability to the prior year results. However, for periods beginning before the adoption date of ASC 606, those adjusted financial measures are considered not to be calculated in accordance with GAAP and are thus presented as non-GAAP financial metrics.

The company believes this additional information is vital during the transition year to allow readers of its financial statements to compare financial results from the preceding financial year given the absence of restatement of the prior period. The company’s non-GAAP financial measures should be considered an addition to, not as a substitute for, nor superior to or in isolation from, measures prepared in accordance with GAAP.